Two basic assumptions of technical analysis are that security prices adjust:a. Gradually to new information, and study of the economic environment provides an indication of future market movements.                                                b. Rapidly to new information, and study of the economic environment provides an indication of future market movements.c. Rapidly to new information, and market prices are determined by the interaction between supply and demand.d. Gradually to new information, and prices are determined by the interaction between supply and demand.

Q: Explain how knowing the standard deviation of a security’s historical returns increases an…

A: The question is based on the concept, which establish relation between return and risk for…

Q: What is the term ei in the single-index model equation ri = E(ri) + βiF + ei? A) the impact of…

A: The single index model shows the relationship between the return and the risk of a security.  It is…

Q: Technical analysis is the search for recurring and predictable patterns in stock prices. It is based…

A: Technical analysis is a trading discipline used to evaluate stock market trends. Technical analysis…

Q: Explain the relationship between strike prices and implied volatilities under a price jump scenario

A: The question is based on the concept of Black Scholes model of option valuation.

Q: The Security Market Line defines the required rate of return for a security to be worth buying or…

A: The expected rate of return is the amount of interest that an investor can expect when investing.

Q: If a security is underpriced (i.e., intrinsic value > price), then what is the relationship…

A: Intrinsic value of a security is the fair value based on the assessment of its fundamentals and…

Q: An increase in the riskiness of a particular security would NOT affect: Select one: A. The risk…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: If the risk-free return were 4.0% and a security's beta coefficient were 2.0, what would be the…

A: Security Market Line: It is a line representing a graphical representation of CAPM (capital asset…

Q: Distinguish between the ‘market period’ (the ‘short-short run’), the ‘short run’ and the ‘long run.’…

A: Marshall established the notion of the market period to characterize markets based on the time…

Q: When market rates of interest rise after a fixed-rate security is purchased, the value of the…

A: Held-to-maturity security:

Q: If the security market is efficient in the strong form, then _____. Group of answer choices a. it…

A: There are three forms of market hypothesis weak form, semi-strong form and strong form

Q: What is security Market Line (SML)? How it explains risk-return relationship? Explain different…

A: What is security Market Line (SML)? The security market line can be understood as a tool for…

Q: Basis risk refers to the risk: a. associated with unanticipated price movements on the underlying…

A: Basis risk =  spot price of underlying instrument - future price of the underlying instrument.…

Q: In general, would a falling rate of market interest cause the price of an MPT security to increase…

A: To determine if the falling rate of market interest cause the price of an MPT security to increase…

Q: Which of the following is not an assumption of technical analysis? A.The security under analysis is…

A: Technical Analysis is used to find out trading opportunities by analyzing the past trends and…

Q: The main ideas of Keynesian economics are: a-the importance of the long run over the short run, and…

A: Journal entries are the building blocks of accounting, which is the act of recording the economic…

Q: what are the sssumptions about market efficiency?

A: The theory that states that all the information available in the capital market is reflected in the…

Q: The feature of the general version of the arbitrage pricing theory (APT) that offers the greatest…

A: Arbitrage Pricing Theory (APT) states that the asset’s return can be determined by using the linear…

Q: The security market line describes the expected return for

A: Security market line (SML) is the representation of the capital asset pricing model. It displays the…

Q: Which tranches in a CMO issue are least subject to price variances related to changes in market…

A: The Tranches are various layers of investors in a collateralized mortgage obligation. There are four…

Q: Does the efficient market hypothesis suggest that an investor can outperform the market? What effect…

A: Does the efficient market hypothesis suggest that an investor can outperform the market?  The…

Q: What is the purpose and workings of the Monetary policy transmission mechanism (MPTM)? What are the…

A: Monetary transmission technique or the mechanism is referred to as the process through which the…

Q: What are market anomalies, and how do they come about? Do they support or refute the EMH? Briefly…

A: Market anomalies:- Market anomalies or Anomaly in market occurs when the market deviates from the…

Q: Explain the random walk model for exchange rate forecasting. Can it be consistent with technical…

A: The Random Walk Model suggests that the movement in the prices of the stocks is unpredictable and if…

Q: If you observe open interest is increasing and prices are moving higher, which of the following…

A: Technical analysis is the technique that tries to predict future movements of the market by studying…

Q: The underlying assumptions of technical analysis are that A.price move in predictable patterns B.…

A: Technical analysis aims at predicting the price movements of securities by using market statistics…

Q: Consider the Security Market Line (SML). What determines its vertical intercept? What determines its…

A:

Q: Determine how the appropriate yield to be offered on a security is affected by a higher risk-free…

A: Risk-free rate.:- The theoretical rate of return on a risk-free investment is known as the risk-free…

Q: Which of the following are economic functions of futures markets? Flexibility in pricing products…

A: "Hi, Thanks for the question. Since you asked multiple question, we will answer first question for…

Q: To what extent does investor mood explain price fluctuations? Explain

A: Investor:- A person or other entity (such as a company or mutual fund) who invests money in the…

Q: Which of the following statement about the yield curve is false? O According to expectations theory,…

A: Yield Curve: It is a line that plots the interest rates of bonds. It represents the different ranges…

Q: Using the AD-AS model, demonstrate the potential causes of inflation

A: AD/ AS curve is demand and supply curve which shows the aggregate demand v/s aggregates supply in…

Q: Describe why it is difficult to manipulate security prices in a well-developed and liquid market.

A: Market manipulation is referred to as an act of artificial deflation or inflation of the security…

Q: Technical analysts believe that investors can use past price changes to predict future price…

A: Like Fundamental analysis, Technical analysis is alsoan analysis tool used by various day traders…

Q: Which of the following theories can be assessed using data that exists at one specific point in…

A: Purchasing power parity: Purchasing power parity (PPP) is a concept which means that exchange rates…

Q: Statement 1: Fundamental analysis is a method of forecasting future price movements of a security…

A: Fundamental analysis is to do analysis of company on the basis of financial and economic performance…

Q: What is weak-form EMH? What would you expect to see/not see if markets where weak form efficient? In…

A: The efficient market hypothesis (EMH) states that all information regarding the value of an asset…

Q: n an efficient market, the price of a security will: Multiple Choice   always rise immediately upon…

A: Market efficiency refers to how well current prices reflect all available, relevant information

Q: Over time, a portfolio manager’s cumulated trade implementation shortfall will equal

A: Trade implementation shortfall is Cumulated direct transaction costs and liquidity costs , Cumulated…

Q: If markets are semi-strong efficient, which of the following situations is most likely to yield…

A: Market refers to a place where buying and selling of goods take place. In finance, there are…

Q: Convexity is the difference between O actual price change and duration-predicted price change O…

A: Convexity measures the curvature

Q: If a financial asset has an expected return that is greater than what is necessary to compensate for…

A: If expected return is more than necessary for compensating risk, investors are earning alpha return…

Q: Explain the term Market Timing strategies?

A: THE MARKETING TIMING STRATEGIES IS GIVEN BELOW-

Q: If you believe market prices can be predicted by solely studying past prices, then you believe the…

A: Weak form of efficiency Market Hypothesis claims that the stock prices may represent the all the…

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.